Supermarkets ask the Government for more time to demonstrate that they are not taking advantage of the VAT reduction to inflate their profit margins

In a bid to ensure compliance with the temporary VAT reduction on food, supermarkets have requested more time from the government to prove that they’re not exploiting the situation to increase their profits. This request comes after an investigation was launched by the Ministry of Consumer Affairs to examine whether supermarket chains were passing on the VAT discount to customers as intended. While some chains have sought an extension of the deadline, the ministry has confirmed that all necessary information has been provided and is currently being reviewed.

Meanwhile, the National Markets and Competition Commission (CNMC) is also monitoring the situation. A report published by the CNMC in July 2023 concluded that the distribution chains were correctly passing on the VAT reduction to final prices. The CNMC is now working on an updated evaluation report. In the absence of this report, the Bank of Spain’s observatory of business margins provides some insight into the industry. According to the latest update, margins in the agri-food chain increased slightly in the second half of 2023, while the food trade experienced declining margins since 2021.

As the government keeps a close eye on supermarkets to ensure compliance with the VAT reduction, the food industry is preparing to ask for an extension of the measure. They will request an extension until the end of the year and expand the list of products affected to include essential items like meat and fish. The Spanish Federation of Food and Beverage Industries (FIAB) will be leading these requests. Additionally, they hope that the processing of the bill, which includes a VAT reduction on olive oil, won’t be delayed due to political uncertainty.